Fertile ground: Tuscola hopes to land chemical plant
TUSCOLA — You might not be able to tell just by looking at it, but an empty field in Douglas County just west of this small town has billion-dollar potential.
The nearby railroad intersection might give it away, but European investors see even more: A crisscross of natural gas lines hides underneath, and the site lies in the middle of some of the richest agricultural land in the world.
That makes Tuscola a contender for a massive $1.2 billion fertilizer production operation, and city and state officials are willing to lay some chips on the table to get it here.
The beneficiary of that bargain is still a bit obscure: Cronus Chemicals LLC incorporated in Delaware in 2012 under a third-party registered agent. Lacking an official headquarters, it lists shared office space in downtown Chicago as its address.
It's a startup company — right now, nothing more than an idea and investors — but its foreign CEO and other leaders have decades of experience in the fertilizer business. The locals involved in trying to land Cronus in Douglas County say they know what they're betting on, and the risk to area residents and taxpayers is low.
"I feel it's been fully vetted," said Brian Moody, the executive director of Tuscola Economic Development, Inc. He's spent a massive amount of time trying to lure the fertilizer plant to Illinois, and he feels he's close.
"It's hard to make one of these happen," Moody said. "We've learned a lot about that. I feel as good about this one as any of them."
But the contending location in Mitchell County, Iowa, is solid, too. And like Illinois, the state of Iowa is doing its best to bring the fertilizer plant to its soil. A site announcement is imminent as Cronus officials work through the details.
"There are lot of factors that go into siting a project like this," said Cronus spokesman Dave Lundy. "It just so happens that Tuscola and the site we're looking at in Iowa are really outstanding locations."
Moody has been disappointed before. The proposed site for Cronus is just south of where officials had looked at putting the FutureGen power plant.
The power plant project strung Tuscola along for almost five years before settling on a site in western Illinois.
It was "a kick in the gut" at the time, Moody said, but he is applying the lessons learned in the FutureGen days to the Cronus proposal now.
Cronus is one of 30 or so fertilizer plant proposals across the country. They've sprung up as fracking has made natural gas — a key component in the fertilizer production process — cheaper and more abundant in the United States. That means fertilizer is coming to America after having spent decades overseas where production costs were cheaper.
"The economics have changed to allow that production to come back home," said Lundy.
The reality, Lundy said, is that of those 30 or so proposals by other prospectors, most won't actually come to fruition.
Moody thinks Cronus looks different. Where other proposers spend a lot of time on fluffy public relations campaigns, Cronus officials have focused their energy on locking down the details.
They spent roughly a year securing a multimillion-dollar deal with the Urbana-Champaign Sanitary District to pump treated wastewater from one county over to cool their equipment, and countless hours and money working through the rest of the plans.
"These were committed folks who were focused on building a plant," Moody said.
Lundy said Cronus' principals have been cautious but sincere in their plans and what they've announced.
"We don't want to get out too far in front and make promises that we can't keep, so we're being really, really, really cautious," Lundy said.
State officials had to do a bit of courting to stay in the competition for Cronus' business. Legislators have laid a $14 million package of incentives on the table as bait, and there's maybe another $16 million or so available to Cronus through existing economic development programs.
The incentives include road and railway improvements and utility tax abatements. A big portion is up to $12 million over 20 years in local property tax abatements that have yet to be structured.
Moody said the local property tax abatements are about half of what officials expect the tax bill would be worth during that 20 years. In other words, even with the incentives, Tuscola's local taxing bodies would expect to see more than $600,000 in new revenues annually if the plant were built — 100 times the $6,000 property tax being paid on the land now, Moody said.
State Rep. Adam Brown, R-Champaign, said he is comfortable laying the incentives on the table for a plant with no guarantee of success.
"I think safeguards are built into the bill," Brown said. "The return on investment is tremendous."
The legislation sets minimums for construction and employment.
"If the company doesn't produce their required threshold for investments as well as the required employment opportunities, then the deal is off," Brown said.
So what does the state get in return? Officials are expecting at least $1.2 billion in construction value, 1,500 jobs at the peak of construction and more than 150 permanent jobs when the plant is up and running.
"I think the benefit for the local area is not just economic, per se, for direct job implications, but I think the trickle down is significant as well," Brown said.
Presumably, the fertilizer produced at Cronus will stay in the region, driving down transportation costs for farmers and ultimately making their operation cheaper to run. Without a plant in Tuscola, area farmers right now are paying to ship their fertilizer over long distances.
"Over a billion dollar investment is just going to be a shot in the arm right where we need it in Illinois," Brown said. "Tuscola is right in the heartland and it represents good working-class families."
Cronus Chemicals is brand new. Just this year it launched a website — cronuschem.com — listing some information about its manufacturing process and the four leaders behind the company.
Its CEO, Erzin Atac, is a Swiss citizen with more than 30 years of experience in the business. From 1997 to 2007, he worked as CEO of Transammonia's fertilizers division, according to the website.
Another principal, Seref Surmen, is a Turkish citizen while a third, John Kinnamon, has local ties — a Central High School graduate with a master's degree from the University of Illinois Springfield. Another principal member is Fred Gill, who has 40 years' experience in the nitrogen fertilizer industry, according to the website.
"Everybody who's involved in this project, probably with the exception of me, has decades of experience in the fertilizer industry," said Cronus spokesman Lundy.
Moody is sold now — though he admits dealing with a brand new LLC had him "worried maybe at the beginning, and that's part of the process."
Over time, he became convinced of the project's experienced sponsors and consultants. He said they have "come through on every promise," and the trust is there.
As far as planning, Moody said there have not been a lot of direct costs to local agencies beyond the time he has spent working on the proposal himself. But the investment on the Cronus side has been significant.
"Nobody invests that kind of money unless they're serious about doing it," Moody said.
State and local officials are offering Cronus Chemicals $14 million in incentives and potentially up to $16 million more through existing economic development programs. What are they expecting in return?
1,500 or more temporary jobs during the height of construction.
150 or more permanent jobs when the plant is in operation "meaningfully above the local median income."
$600,000 annually in new property tax revenue to local taxing bodies.
$300 million in annual economic impact during the height of construction, which is expected to take up to 34 months.
$100 million in annual economic impact after the plant opens, possibly in early 2017.
Would chemicals pose threat? 'No'
Cronus Chemicals spokesman Dave Lundy said safety was foremost on locals' minds as the fertilizer company started talking about its project.
"The immediate question we got from everybody across the country was, 'Does yours go boom?' " Lundy said.
The answer: No. Unlike the West Texas Fertilizer Company explosion last year that killed 15 and damaged or destroyed about 150 buildings in a small Texas town, the Cronus plant would use anhydrous ammonia in its production process.
The West Texas plant used ammonium nitrate — a much more volatile chemical and the same used in the Oklahoma City bombing.
"Anhydrous ammonia is pretty much nonflammable," Lundy said. "It is much safer. It is not the kind of thing that's going to lead to any kind of explosive process."
The anhydrous ammonia would be kept in double-walled tanks and monitored 24 hours a day, Lundy said. From that, the plant would produce mostly urea fertilizer, a granular chemical that is "completely nonhazardous unless you eat it," Lundy said.